UNIVERSITY    OF    CALIFORNIA     AGRICULTURAL    EXPERIMENT   STATION 
COLLEGE   OF  AGRICULTURE  BENJ    '°E  WHEELER'  '""'«•" 

THOMAS    FORSYTH    HUNT,    Dean  and  Director 
BERKELEY  H.    C.    VAN    NORMAN,    Vice-Director    and    Dean 

University  Farm  School 


CIRCULAR  No.  175 

October,  1917 

PROGRESS  REPORT  ON  THE  PRODUCTION 
AND  DISTRIBUTION  OF  MILK 

By  ELWOOD  MEAD 


INTRODUCTION 

During  the  past  year  the  aid  and  advice  of  this  division  has  been 
frequently  sought  by  producers  and  consumers  of  milk  in  the  San 
Francisco  Bay  cities.  Dairymen  stated  that  they  were  producing  milk 
at  a  loss  and  have  sought  advice  about  changing  this  condition  of 
affairs.  Consumers  have  asked  for  co-operation  in  an  effort  to  lower 
the  price  of  milk,  or  at  least  to  prevent  an  increase.  They  pointed 
out  that  a  few  years  ago  milk  retailed  at  six  cents  a  quart ;  that  since 
then  it  has  risen  successively  and  rapidly  to  eight,  nine,  and  ten  cents, 
and  that  there  were  rumors  that  still  higher  prices  were  likely  to  be 
charged.  They  stated  that  existing  prices  are  restricting  the  use  of 
this  wholesome  article  of  food  in  the  families  of  many  wage-earners 
and  that  any  increase  would  threaten  to  make  it  a  luxury  which  they 
could  not  afford.  It  is  not,  therefore,  a  matter  of  money  so  much  as 
of  the  health  and  proper  nourishment  of  the  rising  generation  which 
make  milk  prices  of  such  importance. 

In  dealing-  with  this  matter  it  was  felt  that  there  was  need  of 
more  definite  facts.  Money  for  the  employment  of  experts  to  make 
independent  cost-accounting  surveys  was  not  available,  nor  was  it 
regarded  as  necessary  at  this  time.  Conversations  with  dairymen  and 
milk  distributors  showed  that  they  had  a  definite  understanding  of 
the  details  of  their  business.  They  knew  what  they  were  making  and 
what  they  spent.  Some  were  satisfied  with  conditions  as  they  are; 
others,  who  were  discontented,  believed  they  knew  what  was  wrong. 
The  best  way  to  proceed,  therefore,  seemed  to  be  to  secure  the  interest 
and  co-operation  of  dairymen  and  distributors,  to  whom  the  reasons 
for  the  inquiry  were  explained  and  who  were  asked  to  give  information 
regarding  expenses  which  would  show  the  causes  of  present  prices,  in 


the  belief  that  it  might  relieve  the  anxiety  of  consumers  and  possibly 
point  the  way  to  more  satisfactory  conditions  in  the  future. 

From  the  producers  there  was  an  immediate  and  cordial  response. 
The  distributors  hesitated  at  first  about  supplying  information  con- 
cerning their  business,  which  they  regarded  as  a  private  matter,  but 
as  the  inquiry  has  progressed  this  has  in  large  measure  disappeared. 
In  all  cases  it  was  understood  that  none  of  the  details  of  the  business 
of  any  individual  thus  furnished  would  be  disclosed  without  his  con- 
sent.   It  is  for  this  reason  that  only  summaries  are  published. 

Little  attention  has  been  paid  in  the  inquiry  to  production  and 
distribution  of  certified  milk,  as  its  price  did  not  greatly  concern  the 
class  to  whom  this  matter  is  of  most  vital  importance.  Besides,  the 
great  bulk  of  the  milk  supply  is  rendered  wholesome  by  pasteurization, 
and  it  was  to  conditions  affecting  the  cost  of  pasteurized  milk  that 
most  attention  has  been  paid. 


FIELD  INQUIRIES 

The  greater  part  of  the  data  included  in  this  report  has  been 
gathered  by  S.  H.  Dadisman.  Early  in  June  he  made  a  trip  through 
southern  and  central  California  interviewing  dairymen  and  milk  dis- 
tributors for  the  purpose  of  ascertaining  how  prices  in  other  cities, 
like  Los  Angeles  and  Fresno,  compared  with  the  prices  in  the  bay 
cities.  Questionnaires  were  mailed  to  two  hundred  producers  in 
different  parts  of  the  state,  and  about  one  hundred  replies  were 
received.  The  information  given  in  thirty-six  of  these  replies  from 
dairymen  who  furnish  milk  to  the  bay  cities  has  been  compiled  in 
table  1.  These  give  conditions  as  they  existed  in  June,  1917.  Two 
answers,  Nos.  6  and  8,  were  corrected  late  in  July.  A  sample  ques- 
tionnaire, showing  the  nature  of  the  inquiry,  with  the  replies  of  one 
of  the  dairymen,  together  with  a  summary  of  the  thirty-six  replies, 
is  given  later. 

A  large  amount  of  information  relative  to  the  cost  of  pasteurizing 
plants,  the  most  economical  size  for  such  plants,  and  of  the  cost  of 
equipment  for  distributing  milk,  has  been  gathered  but  is  not  included 
in  this  report. 

MILK  SUPPLY  OF  THE  BAY  CITIES 

About  32,000  gallons  of  milk  are  used  daily  in  San  Francisco  and 
from  20,000  to  24,000  gallons  in  Oakland,  Berkeley,  Alameda,  and 
Richmond.     This  supply  comes  mainly  from  within  a  radius  of  100 


miles,  a  few  supplies  coming  120  miles.  The  average  distance  for  the 
rail  shipments  is  between  60  and  80  miles.  Of  this  supply  the  Asso- 
ciated Milk  Producers'  Association  of  San  Francisco  handles  from 
22,000  to  24,000  gallons  a  day,  or  about  70  per  cent  of  the  whole 
supply.  An  association  of  producers  which  supplies  Oakland  and  the 
east  bay  cities  handles  about  an  equal  percentage  of  the  total  supply 
of  these  cities. 

The  greater  part  of  the  milk  handled  by  the  producers'  associations 
is  sold  to  distributors'  associations.  The  percentage  handled  has 
changed  somewhat  in  the  last  few  months,  but  at  the  time  this  investi- 
gation began  the  distributors  were  handling  between  60  and  70  per 
cent  of  the  total  quantity.  About  6000  gallons  in  San  Francisco  were 
sold  direct  by  producers  to  consumers ;  that  is,  the  dairymen  retailed 
their  own  milk,  and  about  15  per  cent  of  the  milk  supplied  to  other 
bay  cities  is  furnished  direct  by  the  dairymen.  As  has  been  said 
before,  these  percentages  are  constantly  changing  and  this  represents 
the  situation  only  at  the  time  of  the  inquiry  last  June. 

The  price  paid  by  distributors  is  for  milk  delibered  f.o.b  San 
Francisco,  or  east  bay  cities,  the  dairymen  paying  the  freight,  and  is 
based  upon  the  butter-fat  content  of  the  milk.  If  the  milk  contains 
less  than  3.6  per  cent  butter  fat,  there  is  a  deduction  of  14  of  1  cent 
for  each  %0  per  cent  loss  in  butter-fat  content  and  an  increase  of 
14  of  1  cent  for  each  y10  per  cent  of  butter-fat  content  up  to  4.2  per 
cent :  that  is,  if  the  price  were  18  cents  a  gallon  for  3.6  per  cent  milk, 
the  price  would  be  19  cents  a  gallon  for  milk  carrying  4  per  cent  butter 
fat.  When  this  inquiry  began  the  San  Francisco  producers'  associa- 
tion paid  16%  cents  a  gallon  to  their  members  and  sold  at  18  cents. 
Later  on,  the  price  to  distributors  was  raised  to  an  average  of  19  cents. 
The  difference  between  the  16y2  cents  paid  and  the  18  or  19  cents  for 
which  the  milk  sold  paid  the  expenses  of  the  producers'  association 
and  for  losses  sustained  where  more  milk  was  shipped  into  the  city 
than  could  be  taken  by  the  distributors. 

This  loss  at  times  was  a  considerable  item  and  in  order  to  induce 
people  to  join  the  producers'  association  it  had  to  take  their  entire 
supply,  and  as  that  fluctuates  it  frequently  happens  there  is  consider- 
able surplus.  This  surplus  the  San  Francisco  Producers'  Association 
converts  into  cheese  and  butter,  which  brings  less  than  the  price  at 
which  the  whole  milk  is  sold.  If  the  loss  sustained  and  this  surplus  do 
not  absorb  the  difference  between  the  price  paid  producers  and  that 
received  from  distributors  then  this  surplus  is  paid  to  the  producers 
as  a  bonus. 


Sample  Questionnaire 
Dear  Sir: 

The  College  of  Agriculture  is  studying  the  serious  situation  of  the  milk  pro- 
ducers, who  are  confronted  by  higher  cost  in  every  direction,  with  little  or  no 
increase  in  the  selling  price  of  milk.  This  is  leading  to  such  reduction  in  the 
number  of  dairy  cattle  and  in  the  quantity  of  milk  produced  as  to  threaten 
the  supply  of  one  of  the  most  important  food  products.  It  is  in  the  interest 
of  all  that  the  public  should  have  full  and  accurate  information  regarding  the 
existing  situation.  To  this  end  your  help  is  solicited.  Will  you  please  send 
us  the  following  information  about  the  facts  which  affect  the  cost  of  produc- 
ing milk  and  the  ability  of  dairy  farmers  to  maintain  their  herds  under 
existing  conditions. 

1.  Q.  How  many  cows  in  your  herd?     A.  130  cows,  60  young  heifers. 

2.  Q.  How  many  are  you  now  milking?     A.  110. 
Expenses : 

3.  Q.  What  is  the  land  worth,  or  what  rent  do  you  pay? 

A.  140  alfalfa,  20  a.  corn,  100  a.  grain' and  hay,  60  a.  pasture. 

4.  Q.  Whatis  the  land  worth,  or  what  rent  do  you  pay? 

A.  $25  for  alfalfa;  $20  for  corn;  $6  for  hay,  grain,  and  pasture. 

5.  Q.  How  much  food  do  you  purchase? 

a.  Hay?     A.  None.      b.  Bran  or  shorts?     A.  20  tons. 
c.  Other  feed?     A.  40  tons  beet  pulp  (dry). 

6.  Q.  Give  present  prices: 

A.  a b.  Market  price,      c.  Market  price. 

7.  Q.  How  much  help  do  you  employ?    A.  4  milkers,  1  feeder,  2  field  men, 

1  chore  boy,  1  cook,  1  helper,  2  owners  and  managers. 

8.  Q.  What  wages  are  paid?    A.  $75  milkers  and  field  men,  $50  chore  boy, 

$60  cook,  $40  helper,  $125  owner  and  manager. 

9.  Q.  What  are  the  working  hours?     A.     7  a.m.  to  12  m.;  1  p.m.  to  6  p.m. 

10.  Q.  What  are  your  total  expenses  per  month?     A.   $925   wages;    $250 

interest  and  depreciation;    $640  rent  and  feed;    $25  light  and 
power;  total  $1850. 

11.  Q.  How  do  you  dispose  of  your  milk? 

a.  Do  you  sell  to  a  distributor?     A.  Columbia  Dairy,  Oakland. 

b.  Do  you  retail  your  milk  to  consumers?     A.  No. 

12.  Q.  How  many  gallons  of  milk  do  you  sell  per  day?     A.  290. 

13.  Q.  What  per  cent  of  butter  fat  does  the  milk  contain?    A.  3.6  per  cent. 
Receipts : 

14.  Q.  What  prices  do  you  receive  for  the  milk?     A.  f.o.b.  18%  cents  for 

July,  22  cents  for  August. 

15.  Q.  What  are  the  average  shipping  charges  per  can  or  per  gallon  from 

your  dairy  to  the  place  of  delivery?     A.  1%  cents  per  gallon, 
or  17%  cents  per  can. 

19.  Q.  What  is  the  cost  of  producing  a  gallon  of  milk  in  your  dairy  at  the 

present  time.    A.  21%  cents. 

20.  Q.  What  did  it  cost  you  a  year  ago?     A.  16  cents. 

21.  Q.  What  do  you  consider  a  fair  price  per  gallon  for  milk  at  present? 
A.  22%  to  23  cents. 

22.  Q.  What  do  you  consider  your  most  serious  milk  problem?     A.  Labor; 

high  cost  of  equipment;  disease  (abortion  and  tuberculosis). 


TABLE  1 

Summary  of  Replies  from  Thirty-six  Dairymen  Supplying  Milk  to  the 
Bay  Cities  of  California 


1916 


1917 


STo. 

Number 

cows  in 

herd 

Number 
of  cows 
milked 

Gallons 

of 

milk 

Gallons 

A 

Cost  per 
gallon 

delivered 
Cents 

Price  per 
gallon 

received 
Cents 

A 

Cost  per 

gallon 
delivered 

Cents 

^ 
Price  per 
gallon 
received 
Cents 

Per  cent 

of 
butter 

fat 
Per  cent 

Price 

wanted 

Cents 

1 

225 

160 

309 

16.5 

17.0 

17.5 

3.6 

22 

2 

300 

200 

500 

14 

16.5 

25.0 

16.0 

3.75 

25 

3 

280 

240 

740 

18 

16.0 

22.0 

18.5 

3.9 

25 

4 

375 

240 

600 

16.5 

16.5 

3.75 

22% 

5 

560 

420 

1100 

18 

16.5 

25.0 

17.8 

3.7 

27% 

6 

270 

216 

500 

17 

16.5 

28.0 

17.5 

3.6 

291/2 

7 

149 

129 

285 

19 

19.7 

17.0 

3.6 

25 

8 

210 

171 

430 

12% 

16.5 

26.0 

16.1 

3.5 

20 

9 

120 

90 

205 

16.5 

19.0 

18.5 

3.75 

24 

10 

175 

120 

400 

15 

16.0 

20.0 

18.0 

3.5 

24 

11 

140 

108 

230 

16.0 

18.0 

19.0 

3.5 

24 

12 

140 

120 

300 

16.5 

17.2 

18.0 

3.6 

25 

13 

180 

120 

320 

171/2 

17.0 

21.0 

17.5 

3.8 

25 

14 

130 

110 

290 

16 

21.0 

20.5 

3.6 

23 

15 

140 

100 

225 

151/2 

16.0 

22.5 

16.0 

3.6 

221/2 

16 

165 

145 

400 

13 

19.0 

21.0 

4.0 

20 

17 

120 

100 

170 

20.0 

16.0 

3.7 

23 

18 

220 

180 

480 

16 

16.0 

17.0 

19.5 

3.6 

21 

19 

124 

108 

313 

16.5 

21.6 

20.0 

3.6 

20 

140 

120 

280 

18 

16.0 

25.0 

17.5 

3.6 

25 

21 

90 

74 

200 

16.0 

21.5 

19.0 

3.6 

221/2 

22 

120 

60 

80 

15.0 

20.0 

15.0 

21  y2 

23 

75 

60 

160 

16.0 

16.5 

3.8 

21 

24 

65 

54 

140 

18 

16.5 

23.3 

17.5 

3.7 

28 

25 

80 

70 

240 

18 

17.0 

23.8 

retail 

3.6 

271/2 

26 

75 

60 

140 

17.0 

19.0 

3.8 

25 

27 

96 

66 

200 

16.0 

18.5 

17.5 

3.8 

22 

28 

100 

82 

200 

i7y4 

16.2 

20.0 

21.5 

3.8 

25 

29 

55 

48 

140 

i5y2 

16.0 

16.0 

16.0 

4.1 

23 

30 

24 

19 

45 

16 

23.4 

retail 

3.7 

221/2 

31 

40 

23 

75 

10 

16.5 

16.0 

19.0 

3.5 

22 

32 

125 

85 

200 

17 

16.0 

22.0 

19.0 

3.8 

25 

33 

40 

38 

35 

17 

16.0 

25.0 

17.5 

3.6 

25 

34 

70 

45 

90 

16.5 

19.0 

17.5 

3.6 

221/2 

35 

21 

18 

40 

16.0 

24.0 

18.0 

3.6 

25 

36 

6 

6 

20 

17 

17.0 

22.0 

20.0 

3.8 

23 

Average  146 

111 

305.05      16.23 

16.4 

22.7 

19.0 

3.68 

23.74 

Notes 

A  comparison  of  the  production  per  cow  of  the  dairies  included 
in  table  1  shows  that  they  are  considerably  in  excess  of  the  average 
for  the  state.  Thus  the  yearly  production  per  cow  in  table  1  is  759 
gallons,  as  against  500  gallons  average  for  the  state.  The  yearly  pro- 
duction of  butter  fat  is  223  pounds,  as  against  an  average  of  150 
for  the  state.  The  figures  in  table  1  agree  closely  with  those  obtained 
in  comprehensive  cost-inquiry  surveys  in  the  East.  The  average  milk 
production  per  cow  given  in  table  1  is  somewhat  above  the  averages 
of  the  records  of  dairy  herds  investigated  by  Cornell  University,  and 
below  the  averages  of  those  included  in  the  Tri-State  Inquiry.  As  the 
milk  delivered  to  consumers  has  only  to  contain  3.25  per  cent  butter 
fat,  while  the  average  butter-fat  content  of  the  milk  bought  is  3.68  per 
cent,  the  distributor  who  handles  large  quantities  has  a  large  margin 
for  reduction. 

It  will  be  seen  from  the  table  that  the  average  cost  of  milk  has 
risen  from  16.4  cents  a  gallon  in  1916  to  22.7  cents  in  July,  1917, 
while  the  price  received  by  producers  has  risen  from  an  average  of 
16.4  cents  per  gallon  in  1916  to  19  cents  in  July,  1917.  In  both  cases 
the  figures  show  that  milk  has  been  produced  at  a  loss. 

SOME  OF  THE  CAUSES  OF  THE  INCREASED  COST  OF  PRODUCING  MILK 

One  of  the  factors  in  increasing  the  cost  of  milk  is  the  higher  price 
of  foodstuffs  which  dairymen  purchase.  The  quotations  of  prices  of 
food  products  ordinarily  used  by  dairymen  secured  from  seven  of  the 
leading  dealers  and  given  in  table  2,  show  that  in  twelve  months  there 
has  been  an  average  increase  of  about  38.2  per  cent  in  their  prices. 

Other  factors  which  have  increased  the  cost  of  producing  milk  are 
the  higher  wages  paid  men  employed  as  milkers  and  the  higher  rents 
paid  for  land.  Prices  being  obtained  for  wheat,  cotton,  hay,  and 
potatoes  afford  such  profits  on  production  that  landowners  are  taking 
advantage  of  it  and  increasing  rents.  In  one  instance,  furnished 
while  this  inquiry  was  in  progress,  the  rent  was  increased  from  $15 
to  $30  per  acre.  Another  factor  is  the  increasing  cost  of  complying 
with  sanitary  regulations.  These  involve  expenses  for  the  testing  of 
dairy  herds,  for  the  loss  of  animals  affected  with  tuberculosis  or  other 
diseases,  and  for  maintaining  barns  and  milking  sheds  in  proper 
sanitary  condition.  It  has  not  been  possible  to  obtain  any  figures  as 
to  the  progressive  increases  in  cost  due  to  these  items,/but  considerable 
data  regarding  different  items  of  the  cost  of  producing  milk  in  1917 
are  given  in  table  3. 


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TABLE  3 

Wages  and  Other  Expenses  as  Reported  by  Thirty-six  Producers 


No. 

1 
2 
3 
4 

r> 

6 
7 
8 
9 

10 
11 
12 
13 
14 
15 
16 
17 
18 

19 
20 
21 
22 
23 
24 

25 
26 
27 
28 
29 
30 
31 
32 
33 
34 
35 
36 


Price  of  land 
$309 


150-250 


350;  550 
700 


Valley  300 

Hill       7.50 

500-700 

40-  50 


200 


300  up 


None  for  cows 


Price  /— ■ 

Rent               of  Milk- 

per  acre          hay  ers 

$21.30        $55 

10.00     $18.50  50 

17.30  75 

50 

6.00       20.00 

20.00 

30.00       18.00  55 

50 

' 16.00  50 

17.00  50 

16.00 

3.81       18.00  50 

18  00       18.00  50 

25;  20;  6        75 

22.50  80 

20.00       15.00  ;... 

367  a.  $4000       17.85 
a  year  $10.90 

28.50  45 

20.00  45 

18.75        45 

16.40       19.00  50 

10.00       20.00  55 

10;  6       19.00  70- 

board 

65 

70 


Wages 


$35  per  acre 


200 

150 

140 

100;  20 

No  land 

No  land 


20.00 

20.00  17.50 

20.00        

5.00  20.00 

450.00  20.00 

18.00 

18.00 

20.00 


55 

55 

65 
80 
60 
55 


Farm 

hands  Cook 

....  $40 

$65  30 

50  80 

35 


55 

45 
45 

40 

50 
50 
75 
60 


45 

40 
40 

50 


65 
65 
55 
45 


40 


80 
45 


20 
50 
60 
30 


40 
40 
25 


30 
30 


>,  Hours 

Other      Fore-  worked 

help         man  per  day 

8 

$45       $100  9 

45  75 

91/2-IO 

12 

12 

10 

25           80  11 

30         10 

75  7-10 

50         10 

40, 75      125 

100  10, 11 

100  10 

7, 8 

10 

125  10 

40         9y2 

40         10 

12 

8 

40         12 

60         11 

55         100  11, 14 

45         

11 

80         8-10 

10 

14 

11 

11 


COST  OF  DISTRIBUTION 

Eighty-one  letters  of  inquiry  containing  the  following  questions 
were  mailed  to  distributors  of  milk  in  the  bay  cities,  but  owing  to  the 
reluctance  of  many  to  disclose  the  nature  of  their  business,  the  infor- 
mation regarding  costs  of  distribution  is  limited  to  ten  distributors  in 
Oakland  and  Berkeley. 

Questions 

1.  Average  number  of  gallons  of  milk  purchased  daily? 

2.  Average  number  of  galons  distributed  daily? 

3.  Average  daily  losses  from  pasteurization  and  from  other  sources? 

4.  Daily  variations  in  demand? 

5.  Percentage  of  customers  who  take  one  quart  or  more  daily? 

6.  Percentage  of  customers  who  take  less  than  one  quart  daily? 

7.  Cost  of  pasteurizing  milk  when  done  by  distributor? 

8.  Capacity  of  pasteurizing  plant  in  gallons?    Cost  of  pasteurizing  plant? 

9.  Number  of  men  employed  in  pasteurizing  plant  and  in  all  work  except 

that  of  distribution? 

10.  Number  of  milk  routes,  and  number  of  drivers  employed? 

11.  Wages  paid  drivers  and  other  employes? 

12.  Average  number  of  gallons  of  milk  distributed  daily  by  each  driver? 

13.  Average  number  of  miles  traveled  each  day  by  each  distributing  wagon? 

14.  Are  horses  or  motor  vehicles  used  in  distribution?    Which  is  considered 

the  most  economical? 

15.  How  is  surplus  milk  disposed  of? 

Your  opinions  are  desired  as  to  the  feasibility  and  economy  of  the  following 
modifications  of  present  methods: 

1.  Would  there  be  any  economy  or  advantage  in  having  all  the  milk  of 

each  of  the  larger  California  cities  pasteurized  at  one  municipal 
plant  located  so  as  to  be  conveniently  and  cheaply  reached  by  the 
producer? 

2.  Would  there  be  any  advantage  in  having  one  pasteurizing  plant  oper- 

ated by  a  co-operative  association  of  producers  or  distributors? 

3.  Some  cities  have  unified  the  distribution  of  milk,  thus  eliminating  the 

heavy  expense  of  several  delivery  wagons  traversing  the  same 
route.    Is  such  a  plan  feasible  or  desirable? 

If  it  is  entirely  convenient  and  agreeable,  a  representative  of  this  depart- 
ment would  like  to  call  on  you  at  a  date  to  be  arranged,  to  discuss  these 
matters.    Please  let  me  hear  from  you  regarding  this. 


A  majority  of  the  replies  stated  that  the  distributors  would  be 
glad  to  confer  with  a  representative  of  the  division,  and  the  informa- 
tion contained  in  table  4  was  obtained  from  personal  interviews  with 
distributors  by  the  representative  of  the  division. 


10 


TABLE  4 
Cost  per  Gallon  of  Distributing  Milk  in  Oakland  and  Berkeley, 


June  30,  1917§ 


No 


1 

2 

3 

4* 

5 

6 

7 


9 
10 


Routes 

5 
5 

1 
2 
4 
1 
5 
1 
1 
1 


Gallons 

of 
milk 

400 
300 

45 
120 
900 

70 
300f 

60 

15 
8 


Number 

of 

customers 

1712 
1720 

108 

400 
1300 

275 
1200 

175 
60 
23 


Cost  of 

distribution 

per  gal. 

Cents 

12.26 
14.25 
17.00 
12.12 
9.19 
9.76 
11.93 
19.6 
20.1 
12.5 


Cost  of 

distribution 

including 

bad  debts 

Cents 

19.60 

21.86 

17.16 

12.14 

9  96 

10.5 

14.9 

20.38* 

22.3 


16.53 


Average    12.75 

*  Buys  milk  pasteurized  and  bottled. 

t  Retails  2700  gallons  of  milk  per  day. 

X  Certified  milk. 

§  Additional  costs  of  distribution  in  table  6. 

PRICES  CHARGED  CONSUMERS 

In  1916  the  prevailing  prices  charged  consumers  were  5  cents  per 
pint  and  9  cents  per  quart.  This  was  raised  in  the  latter  part  of 
1916  to  6  cents  per  pint  and  10  cents  per  quart.  This  price  has  been 
further  increased  at  a  recent  conference  of  distributors  and  producers 
to  7  cents  per  pint  and  12  cents  per  quart. 

According  to  the  statements  of  producers  represented  in  table  1, 
it  costs  22.7  cents  per  gallon  to  produce  and  deliver  milk  to  San 
Francisco,  and  according  to  the  statements  of  distributors  in  table  4, 
it  costs  them  on  an  average  16.53  cents  to  distribute  milk  in  Oakland 
and  Berkeley,  of  which  3.78  cents  was  due  to  bad  debts,  making  a  total 
for  production  and  distribution  of  39.23  cents.  This  would  seem  to 
show  that  40  cents  a  gallon,  or  10  cents  a  quart,  was  a  sufficient  price 
under  the  conditions  existing  in  June  last,  and  that  what  was  needed 
was  not  an  increased  price  to  the  consumer,  but  a  readjustment  of 
charges  between  the  producer  and  the  distributer,  as  the  producer  was 
apparently  getting  too  little  and  the  distributor  too  much.  In  a  con- 
versation with  one  of  the  large  producers,  who  is  also  a  distributor, 
he  stated  that  what  he  lost  on  production  he  more  than  made  up  in 
profits  of  distribution  and  that  this  enabled  him  to  carry  on  the 
combined  business  with  satisfactory  results. 


11    . 

The  foregoing  data  can  be  regarded  only  as  showing  approximately 
the  actual  situation.  The  cost  data  of  dairymen  were  obtained  in 
June;  those  for  feed  products  in  July  and  August.  It  has  been  a 
period  of  shifting  and  usually  advancing  prices,  for  which  allowance 
has  to  be  made.  The  results  would  be  more  valuable  if  more  dis- 
tributors were  represented  in  table  4.  The  data,  however,  have  been 
compared  with  those  of  elaborate  cost-accounting  investigations  carried 
on  by  public  authorities  in  eastern  cities,  and  the  result  is  believed 
to  be  as  close  an  approximation  to  the  truth  as  is  possible  in  a  period 
of  rapidly-shifting  costs  of  labor  and  equipment  and  feed  for  dairy 
herds.  "Where  all  predictions  are  hazardous,  there  are  reasons  for 
believing  that  all  figures  given  represent  maximum  costs  for  the 
present.  The  regulations  on  prices  of  farm  products  by  the  Federal 
Food  Administration  are  likely  to  lead  to  lower  rather  than  to  higher 
prices  of  feed  for  dairy  herds.  The  unsatisfactory  returns  from 
dairying  have  lowered  the  price  of  cows.  The  universal  protest  against 
the  inefficiency  and  high  costs  of  distribution  ought  to  lead  to  improve- 
ment here  and  elsewhere. 


DISTRIBUTION  NOT  ECONOMICAL 

Entirely  apart  from  the  reasonableness  of  distributors'  charges  for 
the  service  they  render,  it  is  evident  that  this  service  at  present  is 
badly  organized,  and  that  there  is  in  many  cases  a  serious  waste  of 
labor  and  money  which  ought  to  be  corrected.  One  driver  who  delivers 
60  gallons  of  milk  a  day  leaves  the  creamery  twice  in  the  morning  and 
once  in  the  afternoon,  and  travels  during  the  day  a  little  over  40  miles 
to  deliver  milk  to  231  customers ;  110  of  these  take  pints  and  121  take 
quarts.  Some  take  more  than  one  bottle  at  a  time  and  are  content 
with  one  delivery  a  day ;  others  want  deliveries  made  twice  a  day.  In 
this  way  he  travels  over  some  streets  as  much  as  eight  times  in  the 
day.  His  route  has  on  an  average  from  one  to  six  customers  in  a  block 
and  averages  less  than  two  to  the  block.  In  one  case  he  has  to  travel 
outside  of  his  regular  route  a  distance  of  three-quarters  of  a  mile  to 
deliver  milk  to  one  customer.  Such  deliveries  involve  direct  loss; 
they  are  continued  only  because  of  wasteful  competition.  If  he  sup- 
plied milk  to  every  family  on  a  part  of  his  route  he  could  deliver  all 
the  milk  he  supplies  in  less  than  four  blocks,  or  a  saving  of  over  35 
miles'  travel.  In  one  block  in  Berkeley  where  the  situation  was  in- 
vestigated, a  dweller  could  get  milk  from  eighteen  different  dis- 
tributors. In  another  block  on  which  there  are  fifty-eight  houses, 
pight  different  dairies  make  deliveries  of  milk.     In  another  part  of 


,     12 

Berkeley,  which  is  sparsely  settled,  five  wagons  traveled  past  one  of 
the  blocks  where  observations  were  being  made.  In  Oakland  eight 
distributors  deliver  milk  in  the  same  apartment  house  each  day. 
Everywhere  that  this  matter  has  been  studied  there  is  great  duplica- 
tion in  milk  routes. 

The  duplication  of  pasteurizing  plants  is  a  needless  addition  to 
distribution  cost.  There  are  in  San  Francisco  twenty-five  plants;  in 
Oakland  and  Berkeley  there  are  twelve  additional  plants.  Here  is 
a  large  investment  of  money  from  which,  in  many  instances,  no 
adequate  return  is  received.  One  of  these  pasteurizing  plants  is 
operated  only  two  and  a  half  hours  a  day.  It  could  easily  pasteurize 
five  times  the  amount  of  milk  that  it  now  treats  with  very  little 
increase  in  investment  or  operating  expenses. 

The  wages  paid  drivers  of  milk  wagons,  compared  with  the  wages 
paid  laborers  and  milkers  on  dairy  farms,  are  high.  The  drivers  are 
paid  $97.50  for  twenty-six  days'  work,  in  which  they  work  eight  hours 
a  day.  Measured  by  the  hours  worked,  this  is  far  more  than  the  rate 
paid  milkers  on  the  dairy  farms.  For  the  four  days  that  the  regular 
driver  does  not  work  an  extra  driver  is  employed,  who  is  paid  $105 
for  a  month  of  twenty-six  days. 

The  amount  added  to  the  cost  of  distributing  milk  for  bad  debts 
seems  excessive,  and  it  is  unjust  to  saddle  this  on  those  who  meet 
their  obligations.  This  and  the  charges  for  loss  of  bottles  are  largely 
due  to  competition.  The  struggle  to  secure  exclusive  control  of  ter- 
ritory and  to  hold  customers  causes  those  who  are  poor  pay  and  those 
who  are  careless  about  the  return  of  bottles  to  be  retained  as  customers 
where  under  sound  business  considerations  they  would  be  dropped. 

Information  furnished  by  producers  and  distributors  in  Los 
Angeles,  Fresno,  and  smaller  places,  seems  to  indicate  that  milk  is 
more  expensive  in  the  bay  cities  than  in  either  the  central  or  southern 
part  of  the  state.  Table  5  gives  the  summary  of  the  results  obtained 
in  other  sections. 


13 


TABLE  5 

r  of  Production 

and  Distribution  in  Southern  and  Centrai 

i  Califori 

to.             Date 

Cost  of 
Locality          production 
Cents 

Cost  of 

distribution 

Cents 

Total  cost 
per  gallon 
Cents 

1         May  28 

Fresno                 16 

13 

29 

2         May  28 

Fresno                  16% 

13 

29% 

3         May  29 

Bakersfield          17  (4% 

milk)          11* 

28 

4         May  29 

Bakersfield         16 

5f 

21 

5         June    1 

Pomona               19 

18 

37 

6         June    2 

Los  Angeles        21  (4%  milk)         17% 

38% 

7         June  14 

Santa  Cruz          15 

Wio 

28fi0 

8         June  17 

Santa  Cruz         19 

12 

31 

9         July    2 

Los  Angeles        20 

18 

38 

*  Not  pasteurized.         f  Wholesale. 

GENEEAL  DISCUSSION 

The  rise  in  the  price  of  milk  and  the  controversies  between  pro- 
ducers, distributors,  and  consumers  indicate  that  something  besides 
the  unorganized  and  unco-ordinated  efforts  of  individuals,  to  meet  the 
needs  of  large  cities,  must  soon  be  provided.  Milk  is  an  article  of 
food  of  such  universal  use  that  a  cheap  and  wholesome  supply,  especi- 
ally for  children,  is  a  necessity.  The  individual  dairyman  and  dis- 
tributor can,  without  comprehensive  plans  or  concerted  action,  meet 
that  need  in  small  cities  and  towns,  but  it  is  being  proved  that  this 
will  not  answer  for  cities  like  San  Francisco,  Oakland,  or  Los  Angeles. 

In  small  towns  the  individual  can  provide  his  own  water  supply 
through  wells  or  cisterns.  Unpaved  dirt  roads  meet  the  requirements 
of  transportation,  as  people  walk  to  their  business.  Each  family  looks 
after  its  own  lighting  and  sanitation  and  can,  if  it  chooses,  keep  a  cow. 
In  large  cities,  however,  individual  action  is  hopelessly  inadequate.  It 
is  not  possible  to  leave  provision  for  matters  affecting  the  general  wel- 
fare either  to  individuals  or  voluntary  combinations  of  individuals.  A 
water  system  owned  by  the  public  or  under  public  control  has  to  be 
provided,  streets  have  to  be  paved,  and  provision  made  for  street-car 
transportation ;  sanitation  and  matters  affecting  public  health  have 
to  be  placed  under  public  control.  This  may  seem  like  a  trite  state- 
ment of  obvious  facts,  but  the  present  expensive  and  inadequate 
methods  of  supplying  cities  with  milk  and  other  farm  produce  show 
that  their  significance  is  not  realized. 

It  now  has  become  a  question  whether,  in  large  cities,  comprehensive 
action  by  the   public   authorities  should  not   be   taken  to  secure   a 


14 

wholesome  and  cheap  milk  supply  and  to  provide  public  markets  and 
abattoirs  for  cheapening  the  cost  and  distribution  of  essential  articles 
of  food.  It  cannot  be  exepcted  that  individual  dairymen  or  individual 
distributors  will  be  greatly  concerned  about  the  general  welfare  of 
the  city  where  they  sell  their  products.  Jones,  the  dairyman,  conducts 
the  business  for  what  he  can  make  out  of  it  for  Jones.  Brown,  the 
distributor,  is  moved  by  the  same  impulse.  Each  occupies  a  restricted 
field.  He  has  no  power  to  control  the  general  result,  whatever  his 
public  spirit  may  be.  Furthermore,  there  is  a  continuous  and  powerful 
incentive  on  distributors  to  enter  on  a  cut-throat  competition  to  secure 
exclusive  fields,  and  where  this  has  been  accomplished,  to  exploit  the 
separate  and  unorganized  producer.  It  is  an  economic  warfare  in 
which  the  third  party,  the  milk  buyer  is  sooner  or  later  the  victim. 
It  is  a  primitive  method  of  meeting  a  universal  and  vital  need  of  all 
large  cities  which  our  civilization  has  outgrown.  No  nagging  or 
producers  or  distributors,  no  negative  action,  will  give  to  mothers  and 
children  of  wage-earners  the  relief  needed. 

What  is  needed  is  comprehensive  and  expert  public  oversight  that 
will  study  the  needs  of  a  city  as  a  whole  and  coordinate  the  work  of 
producers  and  consumers  so  as  to  eliminate  inefficiency  and  waste,  and 
insure  prices  based  on  the  value  of  the  services  rendered.  Provision 
for  the  feeding  of  the  people  of  great  cities  is  the  most  neglected 
feature  of  our  economic  and  political  organization,  and  the  situation 
in  the  bay  cities  naturally  grows  out  of  this. 

In  San  Francisco  there  has  been  for  several  years  an  association 
of  distributors  seeking  to  secure  enlarged  or  monopoly  control.  They 
have  almost  eliminated  the  small  dairyman  who  retailed  the  product 
of  his  herd.  In  the  eastern  bay  cities  the  same  kind  of  struggle  for 
exclusive  control  is  being  carried  on  by  a  similar  association  of  dis- 
tributors and  there,  also,  the  small  retail  dairyman  is  being  forced 
out  of  business.  Most  of  them  already  have  retired.  Self-protection 
also  forced  the  producers  to  organize,  and  two  producers'  associations 
now  almost  control  enough  of  the  supply  to  be  able  to  dictate  prices. 

So  long  as  these  organizations  of  producers  and  distributors  do 
not  use  their  power  to  increase  prices  unduly  and  thus  exploit  the 
public  they  are  a  public  good.  They  are  a  necessary  step  toward 
co-ordinated  effort  and  economic  efficiency.  Ultimately,  they  will 
eliminate  duplication,  the  inefficient  pasteurizing  plants,  and  those 
methods  which  result  in  a  heavy  percentage  of  losses  through  destruc- 
tion of  milk  bottles  and  bad  debts.  In  the  meantime,  however,  a 
costly  struggle  is  going  on  to  determine  which   of  the   distributors 


15 

shall  survive  and  the  respective  shares  of  what  the  consumer  pays  that 
the  distributor  and  producer  shall  have. 

It  has  to  be  kept  in  mind,  also,  that  so  long  as  there  is  no  public 
oversight  to  protect  the  rights  of  the  consumer,  the  tendency  of  these 
organizations  will  be  to  raise  prices.  They  have  not  been  formed  for 
the  purpose  of  lowering  them.  The  object  is  to  get  control,  and  with 
control  comes  the  temptation  to  make  all  out  of  it  that  the  traffic  will 
bear.  That  is  human  nature  and  is  only  what  should  be  expected. 
The  tendency  of  producers'  and  distributors'  organizations  is  also  to 
protect  their  members,  to  fix  prices  so  that  the  inefficient  can  survive, 
to  base  them  on  the  least  profitable  plants  rather  than  on  the  efficient 
ones,  and  where  control  of  prices  is  established,  the  great  incentive  to 
efficiency  on  the  part  of  both  producer  and  distributor  is  removed. 
If  the  service  costs  more,  it  is  passed  on  to  the  consumer.  That  the 
consumer  pays  more  than  he  should  is  not  a  matter  of  theory.  It 
has  been  shown  by  the  legislative  investigations  recently  completed 
in  New  York  and  elsewhere. 

The  conditions  controlling  milk  supplies  and  milk  prices  in  all  large 
eastern  cities  show  that,  aside  from  price,  the  consuming  public  cannot 
stand  aside  and  be  indifferent  to  the  conflict  going  on  between  pro- 
ducers and  distributors.  Results  show  that  the  distributor,  on  the 
whole,  has  the  advantage  and  he  has  used  this  advantage  in  the  ter- 
ritory contiguous  to  cities  like  Chicago  and  New  York  to  depress  prices 
paid  dairymen  so  as  to  destroy  or  cripple  the  dairying  industry  over 
large  areas  which,  under  normal  conditions,  ought  to  be  prosperous. 

The  New  York  legislative  investigation  of  1917  was  based  on  the 
following  resolution : 

Whereas,  It  is  alleged  that  the  distribution  of  milk  and  butter, 
eggs,  poultry,  and  live-stock  produced  in  this  state  is  controlled  by 
combination  and  monopoly  of  dealers  and  manipulation  of  prices 
to  such  an  extent  as  to  reduce  production  and  in  such  manner 
as  to  impair  the  quality  and  unduly  enhance  the  prices  to  con- 
sumers; and 

Whereas,  It  is  further  alleged  that  such  practices  are  becoming 
more  and  more  aggravated  and  result  in  discouraging  agriculture, 
reducing  production,  depressing  the  value  of  farm  land,  and  in 
increasing  the  cost  while  lowering  the  standard  of  living; 

After  testimony  which  showed  that  one  company  had  expended 
nearly  $200,000  during  the  year  to  stifle  competition,  the  committee 
reaches  the  following  conclusion : 


16 

Under  the  present  competitive  system  it  takes  almost  as  many 
men  to  bring  the  dairyman's  milk  to  the  consumer  as  there  are 
dairymen  engaged  in  the  production  of  milk  with  all  their  em- 
ployees. This  is  the  result  of  the  purely  competitive  basis  upon 
which  the  business  is  handled. 

It  is  believed  by  the  Committee  that  a  State  Department 
equipped  with  all  the  power  permitted  by  our  laws  should  be 
created,  having  the  capacity  to  thoroughly  analyze  and  comprehend 
the  present  situation,  and  having  realized  and  comprehended  it,  to 
provide  ways  and  means  to  consolidate  this  service  not  only  in 
New  York  but  in  every  city  in  the  state. 

What  is  needed  in  the  San  Francisco  Bay  cities  is  the  creation  of 
some  expert  authority  to  study  whether  the  present  location  of  our 
dairying  districts  makes  possible  provision  of  a  milk  supply  as  cheaply 
as  it  could  be  furnished  from  some  other  district  or  districts  where 
land  is  cheaper  even  if  farther  removed.  It  may  well  be  true  that  a 
dairying  district  150  miles  from  San  Francisco,  where  herds  could 
be  fed  on  irrigated  land  and  where  an  express  train  could  bring  its 
product  directly  to  the  city,  could  supply  milk  more  cheaply  than  is 
now  being  done. 

The  economics  of  distribution  should  be  studied,  not  to  determine 
in  what  direction  present  distributors  have  failed,  but  what  could  be 
saved  by  a  carefully  planned  distributing  system  which  would  elimi- 
nate duplication  of  routes,  needless  pasteurizing  plants,  and  overhead 
charges.  Nothing  will  be  gained  by  investigations  which  stop  with 
criticism  of  methods  and  practices  of  those  now  engaged  in  business. 
Considering  the  limitations  under  which  they  have  worked,  they  have 
done  as  well  as  could  be  expected,  and  exactly  what  was  expected.  The 
essential  thing  to  be  recognized  is  that  leaving  this  complex  problem 
wholly  to  private  enterprise  is  an  economic  mistake  which,  sooner  or 
later,  will  have  to  be  corrected.  If  any  investigation  is  undertaken  it 
should  be  undertaken  with  a  view  to  determining  what  the  new  system 
shall  be.  There  are  certain  public  agencies  whose  services  might  well 
be  utilized  in  this  study.  They  are  the  State  Market  Director,  the 
State  Agricultural  College,  and  representatives  of  San  Francisco  and 
east  bay  governments. 


